Critical gaps seen in NRIs retirement plans

Dubai, May 4, 2013

Risk aversion and lack of professional advice is leading to critical gaps in financial and retirement planning amongst UAE-based non-resident Indians (NRIs), according to the first Standard Life NRI Wealth Study.

Standard Life, a leading long term savings and investments company, had opened its Dubai office in November last year to offer retail investors including NRIs access to India funds and other products through financial intermediaries.

Standard Life’s report is the first ever of its kind in the region. It studied the saving, spending and investment behaviour along with general aspirations of nearly 300 NRIs across the UAE.

One of the most striking findings was that ‘family expectations’ played a huge role in retirement planning – 75 per cent of respondents expected to be cared for in retirement by their children.

It also revealed that 26 per cent will return to India after retirement, while 24 per cent will retire in a third country, and 22 per cent will continue working after retirement but in a third country. The study also indicated that only one in ten (10 per cent) had invested in retirement plans for their golden years, said the study.

Chris Divito, the CEO of Standard Life International Limited (DIFC Branch) said, "NRIs are seen to be a family oriented community who rely much on their children and family for their retirement years. This is simply amazing from a family bonding perspective, but it is always advisable to take professional financial advice when it comes to retirement planning."

"With 75 per cent of respondents having three to five financial dependants, there is greater strain of finances and therefore a prudent approach to financial and retirement planning is highly recommended," he noted.

"Many (63 per cent) of the respondents feel positive about the Indian government’s National Pension Scheme (NPS) but most may not have actually subscribed to it. While 25 per cent are of the opinion that that NPS will not provide sufficient income for their retirement years, and 13 per cent did not have any response to the NPS," he said.

Divito pointed out that it was a hugely interesting study for Standard Life as it enabled the bank to better understand target customers in the region.

"These are the kind of insights which are taken into account when we develop specific products aimed at a particular market. The NRI community is important to our business and that is why we are investing in this research," he noted.

The report further revealed that 90 per cent of respondents invested in long term investments in the past. However, most of the investment preferences were towards relatively illiquid assets like gold/diamonds (77 per cent) and property (55 per cent). While less interest was seen towards asset classes like mutual funds (19 per cent) and equities (15 per cent).

"The responses from these NRIs indicate that they are not relying on professional expertise when it comes to their savings and investments. There is clearly an overemphasis on relatively illiquid investments like gold, diamonds, precious metals and property and less priority towards more liquid investments like equities, mutual funds and bonds," stated Divito.

"Obviously, certain aspects of financial planning can vary with individuals and their respective life stages but this study reveals some critical gaps in financial and retirement planning. We would strongly highlight the importance of professional advice towards financial planning to provide a secure financial future and retirement," he added.-TradeArabia News Service